SEOUL, KOREA - After the tragic sinking incident of the ferry Sewol, the government is reviewing a plan to provide financial assistance to passenger ferry companies to modernize their fleets and improve safety measures. This is based on the judgment that institutional change involving risk management response system alone would not suffice to substantially raise the safety levels.

 

According to the Ministry of Strategy & Finance and the Ministry of Oceans and Fisheries on April 25, the government will soon introduce a coastal passenger ferry fund and a joint vessel purchase program as a way to prevent the repeat occurrence of the accident. The fund will be used to lend to ferry companies at low interest rates for purchasing new ships. Under the joint vessel purchase program, used by the Japanese government to encourage shipowners to replace obsolete ships, ship operating companies and the government will share the cost of buying a new vessel.

 

For example, under a 50:50 joint purchasing arrangement, the ferry company will buy a ship at half the price with the remaining balance paid to the government in the form of a long-term loan from the proceeds of the operation. Once the payment is fully made, the ownership of the vessel goes to the ferry company.

 

A Ministry of Oceans and Fisheries official said, "In order to enhance safety and service quality levels of domestic passenger ferry companies, a strong measure of restructuring that would consolidate small, poorly managed ferry companies is called for."

 

Given the Japanese government doesn't allow any passenger ferries older than 15 years from operation, it is urgent for Korean ferry operators to replace obsolete boats. The government is in position to actively encourage small operators to close shop or merge with other firms while giving financial support to those financially sound ones to modernize their fleets and improve safety.